The repercussions of Barclays closing 250 accounts held by money remitters have the possibility of being extremely detrimental to millions of Somalis who rely on these funds to live. The move, which came into effect earlier this week, essentially cuts off a lifeline that is estimated to be worth as much as US$1.2 billion every year - more than the entire humanitarian support the country receives.

For a country that doesn't have a banking system, this is the only way millions are able to receive cash for basic necessities. The closure has even led to the Somali Prime Minister, Abdi Farah Shirdon, to speak out against the move.

Banks are key instruments for the financial transfer of accumulated remittance deposits. They also act as "proxy regulators" used by governments to combat money laundering and terrorist financing. However, they often have a meagre understanding on how money remitters operate. As a result, and because of the risk averse nature of banks, they would prefer not to do business with remittance companies.

Banks in the UK have come under ever increasing scrutiny from regulators in relation to international financial transfers. In August 2010, Barclays was ordered to pay $298m (£190m) and Standard Chartered, in December 2012, was asked to pay more than $300 million in fines to the US authorities for violating international sanctions by handling hundreds of millions of dollars in clandestine transactions with banks in Cuba, Iran, Libya, Sudan and Burma.

It is fair to say that banks have had their nerves frayed at the edges by having to pay hefty fines. This has shifted the focus on organisations that deal with transferring money, often to countries which have financial systems that are less than stable - most notably Hawala and humanitarian organisations. A Hawala is a money transfer system which has its origins in the Arab world and is largely based on trust and are common in area such as Somalia and the Horn of Africa.

In October of last year, UK based charity Islamic Relief had their account closed by UBS as well as incoming donations blocked into the account - ultimately affecting the work taking place on the ground. Similarly, many other relief organisations have had an increasing problem with banking including opening an account, delays and blocks in transferring funds and receiving donations from abroad - all of which has impacted on the assistance provided of these charities.

There are several regulated Hawala in the UK and USA. Dahabshiil, the largest money remitter to Somalia, is registered and regulated by the Financial Services Authority (FSA) in the UK. This means that it will have to respond to the FSA for any wrongdoing in the same way banks have had to respond to the same entity in the aftermath of the credit crunch.

This begs the question, if banks are coming under increased scrutiny and charities as well as Hawala are bearing the brunt of the over cautiousness by banks, surely there is another way. Hawala are a very popular partner chosen by humanitarian agencies to distribute cash in Somalia. It enables a safe and quick disbursement of money to beneficiaries in a project area. This opportunity is increasingly exploited by aid agencies operating in complex situations like Somalia where the weak local administration and the security risk undermine humanitarian response.

In a sector where a successful timely response to a crisis is heavily linked to the readily accessible funds, a discussion needs to take place to ensure that charities and registered money transfer services can serve their beneficiaries without obstacles in the way that could lead to the loss of life.

Regulators need to do more to address this problem by working with money transfer services and charities, to have a greater understanding of how these organisations work and how stringent regulation can negatively impact their work.